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backdoor Roth IRA issue

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  • backdoor Roth IRA issue

    I am attempting my first backdoor Roth IRA (and spousal) with Vanguard. I opened a traditional IRA at Vanguard and transferred 5500 into the traditional IRA Vanguard Settlement Fund. When opening the traditional IRA I could find no way to switch the fund. Now I have to wait 7 calendar days to convert to a Roth IRA (when attempting it says there are not enough available funds to perform the operation).

    I am not concerned about the 7 days but I wonder if anyone else has had this issue?

     

     

  • #2
    I wonder if it is because it is in the traditional IRA settlement fund. Seems like putting the money into just the regular money market fund and then converting seems to work well for most people. Maybe you could buy the money market fund shares and then convert to avoid the 7 days?

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    • #3
      It took me a few days with Fido.  I wonder if they're just waiting for the funds to be cleared from the bank account from which you made the contribution.

      I wonder if they do this to prevent the "step doctrine" from taking place.  Either way, it is exceedingly unlikely you will earn anything on that (all IRS reports are rounded to the nearest dollar), and even if you do, you might end up adding $5 or so to your 1040 next year just in case your decimal on Form 8606 makes it all the way down to 0.999.

      Don't even worry about it.  Just convert it when you can.

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      • #4
        vanguard waits for everything to clear. this is their standard time frame.

        after it clears you choose exchange funds -> move as 100% not in dollars into your rIRA -> taadaa.

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